Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files.) Yes x No

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.

Large
accelerated filer x

Accelerated
filer

Non-accelerated
filer (Do not check if a smaller reporting
company)

Smaller
reporting company

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
No x

There
were 709,502,223 shares of Marathon Oil Corporation common stock outstanding as
of April 30, 2010.

Unless
the context otherwise indicates, references in this Form 10-Q to “Marathon,”
“we,” “our,” or “us” are references to Marathon Oil Corporation, including its
wholly-owned and majority-owned subsidiaries, and its ownership interests in
equity method investees (corporate entities, partnerships, limited liability
companies and other ventures over which Marathon exerts significant influence by
virtue of its ownership interest).

These
consolidated financial statements are unaudited; however, in the opinion of
management these statements reflect all adjustments necessary for a fair
presentation of the results for the periods reported. All such
adjustments are of a normal recurring nature unless disclosed
otherwise. These consolidated financial statements, including notes,
have been prepared in accordance with the applicable rules of the Securities and
Exchange Commission and do not include all of the information and disclosures
required by accounting principles generally accepted in the United States of
America for complete financial statements.

Reclassifications
– We have revised 2009 amounts of capital expenditures in the consolidated
statement of cash flows. The presentation within the consolidated
statement of cash flows for additions to property, plant and equipment reflects
capital expenditures on a cash basis. The following reflects the
reclassifications made:

Three
Months Ended

Six
Months Ended

Nine
Months Ended

(in
millions)

March
31, 2009

June
30, 2009

September
30, 2009

Capital
expenditures from continuing operations,

previously
reported

$

(1,336

)

$

(2,939

)

$

(4,350

)

Discontinued
operations, previously reported

-

(47

)

(66

)

Reclassification
of capital accruals

(284

)

(287

)

(402

)

Additions
to property, plant and equipment,

including
discontinued operations

$

(1,620

)

$

(3,273

)

$

(4,818

)

The
corresponding offsets to the amounts above have been reflected within cash
provided by operating activities through change in current accounts
payable and accrued liabilities.

Variable
interest accounting standards were amended by the Financial Accounting Standards
Board (“FASB”) in June 2009. The new accounting standards replace the
existing quantitative-based risks and rewards calculation for determining which
enterprise has a controlling financial interest in a variable interest entity
with an approach focused on identifying which enterprise has the power to direct
the activities of a variable interest entity. In addition, the
concept of qualifying special-purpose entities has been
eliminated. Ongoing assessments of whether an enterprise is the
primary beneficiary of a variable interest entity are also
required. The amended variable interest accounting standard requires
reconsideration for determining whether an entity is a variable interest entity
when changes in facts and circumstances occur such that the holders of the
equity investment at risk, as a group, lack the power from voting rights or
similar rights to direct the activities of the entity. Enhanced
disclosures are required for any enterprise that holds a variable interest in a
variable interest entity. Prospective application of this standard in the first
quarter of 2010 did not have significant impact on our consolidated results of
operations, financial position or cash flows. The required
disclosures are presented in Note 3.

A
standard to improve disclosures about fair value measurements was issued by the
FASB in January 2010. The additional disclosures required include:
(1) the different classes of assets and liabilities measured at fair value, (2)
the significant inputs and techniques used to measure Level 2 and Level 3 assets
and liabilities for both recurring and nonrecurring fair value measurements, (3)
the gross presentation of purchases, sales, issuances and settlements for
the

rollforward
of Level 3 activity, and (4) the transfers in and out of Levels 1 and
2. We adopted all aspects of this standard in the first quarter of
2010, including the gross presentation of the Level 3 activity rollforward,
which could have been deferred until next year. This adoption did not
have a significant impact on our consolidated results of operations, financial
position or cash flows. The required disclosures are presented in
Note 11.

Oil
and Gas Reserve Estimation and Disclosure standards were issued by the FASB in
January 2010, which align the FASB’s reporting requirements with the Securities
and Exchange Commission (“SEC”) requirements. Similar to the SEC
requirements, the FASB requirements were effective for periods ending on or
after December 31, 2009. The SEC introduced a new definition of oil
and gas producing activities which allows companies to include volumes in their
reserve base from unconventional resources. The FASB also addresses
the impact of changes in the SEC’s rules and definitions on accounting for oil
and gas producing activities. Initial adoption did not have an impact
on our consolidated results of operations, financial position or cash flows;
however, there will be an impact on the amount of depreciation, depletion and
amortization expense recognized in future periods. The effect on
depreciation, depletion and amortization expense in the first quarter of 2010,
as compared to prior periods, was not significant.

The
Athabasca Oil Sands Project (“AOSP”), in which we hold a 20 percent undivided
interest, contracted with a wholly-owned subsidiary of a publicly traded
Canadian limited partnership (“Corridor Pipeline”) to provide materials
transportation capabilities among the Muskeg River mine, the Scotford upgrader
and markets in Edmonton. The contract, originally signed in 1999 by a
company we acquired, allows each holder of an undivided interest in the AOSP to
ship materials in accordance with its undivided interest. Costs under
this contract are accrued and recorded on a monthly basis, with a $1 million
current liability recorded at March 31, 2010. Under this agreement,
the AOSP absorbs all of the operating and capital costs of the
pipeline. Currently, no third-party shippers use the
pipeline. Should shipments be suspended, by choice or due to force
majeure, we are responsible for the portion of the payment related to our
undivided interest for all remaining periods. The contract expires in
2029; however, the shippers can extend its term perpetually. This
contract qualifies as a variable interest contractual arrangement and the
Corridor Pipeline qualifies as a VIE. We hold a significant variable
interest but are not the primary beneficiary because our shipments are only 20
percent of the total; therefore, the Corridor Pipeline is not consolidated by
Marathon. Our maximum exposure to loss as a result of our involvement
with this VIE is the amount we will be required to pay over the contract term,
which was $1.0 billion as of March 31, 2010. The liability on our
books related to this contract at any given time will reflect amounts due for
the immediately previous month’s activity, which is substantially less than the
maximum exposure over the contract term. We have not provided
financial assistance to Corridor Pipeline and we do not have any guarantees of
such assistance in the future.

4. Income
per Common Share

Basic
income per share is based on the weighted average number of common shares
outstanding, including securities exchangeable into common
shares. Diluted income per share assumes exercise of stock options
and stock appreciation rights, provided the effect is not
antidilutive.

During
the first quarter 2010, we closed the sale of a 20 percent outside-operated
interest in our E&P segment’s Production Sharing Contract and Joint
Operating Agreement in Block 32 offshore Angola. We received net
proceeds of $1.3 billion and recorded a pretax gain on the sale in the amount of
$811 million. We retained a 10 percent outside-operated interest in
Block 32.

Integrated
Gas (“IG”) – markets and transports products manufactured from natural
gas, such as liquefied natural gas (“LNG”) and methanol, on a worldwide
basis; and

4)

Refining,
Marketing and Transportation (“RM&T”) – refines, markets and
transports crude oil and petroleum products, primarily in the Midwest,
upper Great Plains, Gulf Coast and southeastern regions of the
U.S.

Our Irish and Gabonese businesses were
sold in 2009 and were accounted for as discontinued
operations. Segment information for the first three months of 2009
excludes any amounts for these operations.

Management
believes intersegment transactions were conducted under terms comparable
to those with unrelated parties.

(b)

Differences
between segment totals and our totals represent amounts related to
corporate administrative activities and other unallocated items and are
included in “Items not allocated to segments, net of income taxes” in
reconciliation below.

Management
believes intersegment transactions were conducted under terms comparable
to those with unrelated parties.

(b)

Differences
between segment totals and our totals represent amounts related to
corporate administrative activities and other unallocated items and are
included in “Items not allocated to segments, net of income taxes” in
reconciliation below.

The
effective income tax rate is influenced by a variety of factors including the
geographic and functional sources of income, the relative magnitude of these
sources of income, and foreign currency remeasurement effects. The
provision for income taxes is allocated on a discrete, stand-alone basis to
pretax segment income and to individual items not allocated to
segments. The difference between the total provision and the sum of
the amounts allocated to segments and to individual items not allocated to
segments is reported in “Corporate and other unallocated items” shown in Note
6.

We
are continuously undergoing examination of our U.S. federal income tax returns
by the Internal Revenue Service. Such audits have been completed
through the 2005 tax year. We believe adequate provision has been
made for federal income taxes and interest which may become payable for years
not yet settled. Further, we are routinely involved in U.S. state
income tax audits and foreign jurisdiction tax audits. We believe all
other audits will be resolved within the amounts paid and/or provided for these
liabilities.

Inventories
are carried at the lower of cost or market value. The cost of
inventories of crude oil, refined products and merchandise is determined
primarily under the last-in, first-out (“LIFO”) method.

A
new, detailed study of the commerciality of the Gardenia well in Equatorial
Guinea concluded that development of this area is now uncertain and therefore
$20 million in costs associated with this well were written off in the first
quarter of 2010. The remaining $10 million of exploration well costs
in Equatorial Guinea are associated with the Corona well which were incurred in
2004. Efforts to develop these reserves continue and we are
evaluating both a unitization with existing production facilities and
stand-alone development.

The coal
bed methane project in the United Kingdom was added to this category in the
first quarter of 2010 at a cost of $15 million. Most of the project
costs were incurred in 2008. Technical work is ongoing to develop well design
programs along with sourcing a suitable drilling rig.

In
December 2009, we began drilling the Flying Dutchman prospect, located on Green
Canyon Block 511 in the Gulf of Mexico. The Flying Dutchman reached
its targeted total depth in early May 2010. The well encountered
hydrocarbon-bearing sands in an Upper Miocene that will require further
technical evaluation. During the second quarter of 2010, we
anticipate expensing approximately $45 million for drilling costs incurred below
the depth of the hydrocarbon-bearing sands. The results of the Flying
Dutchman well will be evaluated along with additional potential drilling on
Green Canyon Block 511 to determine overall commerciality. As a
result, approximately $90 million of exploratory well costs will be suspended
while we evaluate the results. We are the operator and will have a 63
percent working interest in this prospect.

Commodity
and interest rate derivatives in Level 3 are measured at fair value with a
market approach using prices obtained from various third-party services such as
Platt’s and price assessments from other independent brokers. The
fair value of foreign currency options is measured using an option pricing model
for which the inputs are obtained from a reporting service. Since we
are unable to independently verify information from the third-party service
providers to active markets, these measures are considered Level 3.

The
following is a reconciliation of the net beginning and ending balances recorded
for derivative instruments classified as Level 3 in the fair value
hierarchy.

Three
Months Ended March 31,

(In
millions)

2010

2009

Beginning
balance

$

9

$

(26

)

Total
realized and unrealized gains (losses):

Included
in net income

(1

)

77

Included
in other comprehensive income

2

-

Purchases

2

-

Sales

-

(22

)

Settlements

(4

)

(20

)

Ending
balance

$

8

$

9

Net
income for the quarters ended March 31, 2010, and 2009 included unrealized
losses of $1 million and gains of $76 million related to instruments held on
those dates. See Note 12 for the impacts of our derivative
instruments on our consolidated statements of income. There were no
transfers of fair value estimates among hierarchy levels in the first quarter of
2010.

Fair
Values – Nonrecurring

The
following table shows the values of assets, by major category, measured at fair
value on a nonrecurring basis in periods subsequent to their initial
recognition.

Our
current assets and liabilities accounts contain financial instruments, the most
significant of which are trade accounts receivables and payables. We
believe the carrying values of our current assets and liabilities approximate
fair value, with the exception of the current portion of receivables from United
States Steel and the current portion of our long-term debt which is reported
above. Our fair value assessment incorporates a variety of
considerations, including (1) the short-term duration of the instruments (e.g.,
less than 1 percent of our trade receivables and payables are outstanding for
greater than 90 days), (2) our investment-grade credit rating, and (3) our
historical incurrence of and expected future insignificance of bad debt expense,
which includes an evaluation of counterparty credit risk.

The
fair value of the receivables from United States Steel is measured using an
income approach that discounts the future expected payments over the remaining
term of the obligations. Because this asset is not publicly-traded
and not easily transferable, a hypothetical market based upon United States
Steel’s borrowing rate curve is assumed and the majority of inputs to the
calculation are Level 3. The industrial revenue bonds are to be
redeemed on or before January 1, 2012, the tenth anniversary of the USX
Separation.

Restricted
cash is included in our other noncurrent assets line. The majority of
our restricted cash represent cash accounts that earn interest; therefore, the
balance approximates fair value. Fair values of our other financial
assets included in our other noncurrent assets line and of our financial
liabilities included in our deferred credits and other liabilities line are
measured using an income approach and mostly are internally generated inputs,
which results in a Level 3 classification. Estimated future cash
flows are discounted using a rate deemed appropriate to obtain the fair
value.

Over
90 percent of our long-term debt instruments are publicly-traded. A
market approach, based upon quotes from major financial
institutions is used to measure the fair value of such debt. Because
these quotes cannot be independently verified to the market they are considered
Level 3 inputs. The fair value of our debt that is not
publicly-traded is measured using an income approach. The future debt
service payments are discounted using the rate at which we currently expect to
borrow. All inputs to this calculation are Level 3.

12. Derivatives

For
information regarding the fair value measurement of derivative instruments see
Note 11. The following table presents the gross fair values of
derivative instruments, excluding cash collateral, and where they appear on the
consolidated balance sheets as of March 31, 2010 and December 31,
2009.

As
of March 31, 2010, we had multiple interest rate swap agreements with a total
notional amount of $1,450 million at a weighted average, LIBOR-based, floating
rate of 4.4 percent. The offsetting impacts on both the derivative
and the hedged item were $5 million in the first quarter of 2010.

At
March 31, 2010, we had no borrowings against our revolving credit facility and
no commercial paper outstanding under our U.S. commercial paper program that is
backed by the revolving credit facility.

In
April 2010, we repurchased $500 million in aggregate principal of our debt under
two tender offers for the notes below, at a weighted average price equal to 117
percent of face value.

In
conjunction with our acquisition of Western Oil Sands Inc. on October 18, 2007,
Canadian residents were able to receive, at their election, cash, Marathon
common stock or securities exchangeable into Marathon common stock (the
“Exchangeable Sh